Home Ratings and Research Currently valid ERA affirms unsolicited rating BBB+ to DUNAJSKÁ STREDA, outlook Stable
ERA affirms unsolicited rating BBB+ to DUNAJSKÁ STREDA, outlook Stable
Friday, 07 June 2019

The affirmation of the unsolicited credit rating of Dunajská Streda stems from changes in the evaluation of key assessment indicators according to ERA's new Methodology, where greater importance is placed on debt, liquidity profile, and operating balance indicators. With floating weights, higher weight is assigned to debt and liquidity indicators when exceeding the deterioration limit values.

The rating assigned to the city of Dunajská Streda remains unchanged and is mainly based on a positive assessment of high liquidity levels and operating balance surpluses. In the debt profile, the lower assessment is based on the results of the debt burden analysis, where ERA has lowered the scoring because of deterioration in the debt outlooking indicators.

Rating components

Institutional Factors

Governance and Fiscal Flexibility

Moderate

Budgetary and Management Performance

High

Political Environment

High

Transparency

High

Final assessment

 High

Financial Factors

Debt Profile

Very high

Liquidity Profile

Very high

Operating Balance

High

Regional Economy

High

Final assessment

High

Extraordinary Support

Final assessment

High

Overall score

High

Final rating

BBB+

Outlook: Stable

The outlook has been assigned based on the expectation of a high level of short-term liquidity, sustainable level of current balance surpluses, and the ability of the city to cover all debt service obligations despite increased indebtedness.

The stable outlook assumes that the rating will most likely stay unchanged within the 12-month horizon.

Key assumptions

  • Indebtedness will not increase significantly compared to 2019;
  • The short-term liquidity ratio will not reach lower levels than forecasted for 2019;
  • The operating balance will reach a higher surplus than projected for 2019.

Potential outlook and/or rating change factors

A positive rating action may be prompted by:

  • Significantly lower debt levels than forecasted for 2019;
  • Significantly higher operating balance surplus compared to 2018;
  • Significantly higher use of capital grants than projected for 2019;
  • Significant improvement in macroeconomic development in the Slovak Republic.

The likelihood that the positive rating action factors will be fulfilled during the rating period is considered to be low.

A negative rating action may be prompted by:

  • Significantly higher debt levels than projected for 2019;
  • Significant deterioration of liquidity indicators compared to 2018;
  • Significantly lower level of operating balance surplus than projected for 2019.

The likelihood that the negative rating action factors will be fulfilled during the rating period is considered to be low.

In ERA's complementary assessments, an extraordinary support analysis with the rating of sovereign entity are also taken into consideration. The full rating report in Slovak is available here.

Appendix 1. Budget Execution Reports for 2016 – 2018 in thous. EUR

Budget item

Execution 31/12/2016

in %

Execution 31/12/2017

in %

Execution 31/12/2018

in %

Current income total

17,505

102 %

18,842

100 %

21,146

102 %

  Tax income

10,089

103 %

10,761

102 %

11,973

104 %

  Non-tax income

1,999

104 %

2,295

97 %

2,933

98 %

  Grants and subsidies

5,417

100 %

1,341

93 %

6,240

100 %

Current expenditure total

15,641

97 %

16,642

99 %

18,510

96 %

  Interest expenses

101

80 %

86

99 %

92

104 %

Current account surplus/deficit

1,864

x

2,200

x

2,636

x

Capital income total

497

77 %

178

18 %

674

43 %

  Income of property sold

253

65 %

178

101 %

674

43 %

  Capital grants and subsidies

244

95 %

0

0 %

0

0 %

Capital expenditure total

1,399

88 %

1,316

28 %

6,236

74 %

Capital account surplus/deficit

- 902

x

- 1,138

x

- 5,562

x

Financial operations, income

623

100 %

1,477

61 %

5,888

100 %

  Loans from banks

0

100 %

668

42 %

2,532

100 %

Financial operations, expenditures

666

100 %

619

100 %

558

100 %

  Principal payments

476

100 %

419

100 %

421

100 %

Financial account surplus/deficit

- 43

x

858

x

5,330

x

TOTAL  INCOME

18,625

101 %

20,497

93 %

27,708

98 %

TOTAL  EXPENDITURE

17,706

96 %

18,577

84 %

25,304

90 %

TOTAL BUDGET SURPLUS/DEFICIT 

919

x

1,920

x

2,404

x

Sources: 2016-2018 Budget execution reports for the city of Dunajská Streda, ERA’s calculations

Appendix 2. Balance Sheet for 2016 – 2018 in thous. EUR

Balance item

31/12/2016

31/12/2017

31/12/2018

Assets

Fixed Assets:

65,487

65,293

68,486

  Intangible assets

69

101

112

  Tangible assets

45,733

44,193

47,238

  Long-term financial assets

19,685

20,999

21,136

Short-term assets:

6,585

8,953

8,353

  Stock

0

0

0

  Settlements

2,201

3,340

3,937

  Long-term receivables 

0

0

0

  Short-term receivables

2,065

1,813

1,685

  Cash and equivalents

1,919

3,400

2,331

  Repayable financial assistance

400

400

400

Accruals

274

232

193

TOTAL ASSETS

72,346

74,478

77,032

Liabilities

 

 

 

Equity/Funds

60,064

60,767

61,920

Liabilities

7,708

9,042

9,836

  Long-term liabilities

2,035

1,949

1,849

  Short-term liabilities

1,120

2,241

969

  Reserves

3

2

2

  Bank loans and financial assistance

4,550

4,850

7,016

  Settlements

0

0

0

Accruals

4,574

4,670

5,277

TOTAL LIABILITIES

72,346

74,478

77,032

Sources: 2016-2018 Financial statements for the city of Dunajská Streda, ERA's calculations

Appendix 3. Multiannual City Budget for 2019 – 2021 in thous. EUR

Budget item

Budget for 2019

(after changes)

Budget for 2020

Budget for 2021

Current income total

21,810

21,401

22,088

  Tax income

12,710

12,394

13,081

  Non-tax income

2,692

2,627

2,627

  Grants and subsidies

6,408

6,380

6,380

Current expenditure total

20,163

19,823

20,384

  Interest expenses

127

127

127

Current account surplus/deficit

1,647

1,578

1,704

Capital income total

1,845

85

85

  Income of property sold

112

85

85

  Capital grants and subsidies

1,733

0

0

Capital expenditure total

5,245

69

69

Capital account surplus/deficit

- 3,400

16

16

Financial operations, income

2,335

0

0

  Loans from banks

0

0

0

Financial operations, expenditures

582

582

582

  Principal payments

582

582

582

Financial account surplus/deficit

1,753

1,012

1,138

TOTAL  INCOME

25,990

21,486

22,173

TOTAL  EXPENDITURE

25,990

20,474

21,035

TOTAL BUDGET SURPLUS/DEFICIT 

0

1,012

1,138

Sources: 2019-2021 Multiannual budget forecats for the city of Dunajská Streda , ERA's calculations

Appendix 4. List of Material Data Sources

Internal data sources

External data sources

Budget execution reports for 2016, 2017, and 2018

Ministry of Finance of the Slovak Republic

Balance sheet for 31/12/2016, 31/12/2017, and 31/12/2018

Statistical Bureau of the Slovak Republic

Notes to financial statements for 31/12/2016, 31/12/2017, and 31/12/2018

Eurostat

Budget forecast for 2019 and Multiannual city budget for 2020-2021

World Bank

Budget amendments in 2019

National Bank of Slovakia

2018 City controller report on control results

Dunajská Streda city web-page

City controller report on budget forecast for 2019 and Multiannual city budget for 2020-2021

Investment Plan for 2019

Regulatory disclosure

The unsolicited credit rating and outlook were issued in accordance with ERA methodology for sovereign entities in the version from May 31, 2019 (available at www.euroratings.co.uk, section Methodology). In the same section is a rating scale including an explanation of the importance of each rating category and a default definition. Information on the rate of historical failure is available at www.cerep.esma.europa.eu, and the explanatory statement of the meaning of those default rates is available at www.euroratings.co.uk (Regulatory Framework/Disclosure). This rating is issued as an unsolicited rating, i.e. was not initiated by the rated entity or a related third party. The rated entity did not participate in the rating process and the information and documentation for its development was obtained from publicly available sources in accordance with ERA methodology. ERA did not have access to the rated entity's internal documents. ERA, in the context of routine care, verified all sources entering the rating process. ERA considers the scope and quality of the information entering the analytical process to be sufficient to assign a credit rating. The disclosure of the unsolicited rating and outlook was preceded by the approval of the Rating Committee. No actual or potential conflicts of interest have arisen. Since July 30, 2012, ERA has been a registered credit rating agency according to Regulation (EC) No 1060/2009 of the European Parliament and of the Council of September 16, 2009, on credit rating agencies. The previous rating assessment was released on June 8, 2018. The rated entity was notified about affirmation of credit rating assessment and outlook on June 5, 2019 and after the notification there were no changes or amendments in the rating. The previous unsolicited credit rating was released at BBB+, outlook Stable.

Download pdf:

Rating_Report_Sub-Sovereign_DUNAJSKÁ_STREDA_EN_20190607.pdf


Approved by the Rating Committee:

Zuzana Hrebičková, Acting

Head of credit rating analysts

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